: Jefferies slashes earnings estimates for Goldman and Morgan Stanley ahead of earnings updates next week

Jefferies analyst Daniel Fannon on Tuesday cut his earnings estimates for Goldman Sachs Group Inc. GS and Morgan Stanley MS ahead of second-quarter updates from the banks in coming days. Citing a decline in investment banking and sales and trading, Fannon lowered his second-quarter profit view for Goldman Sachs by 56% to $3.82 a share, below the latest consensus estimate of $4.73 a share, as compiled by FactSet. He reduced his second-quarter profit view on Morgan Stanley by 32% to $1.17 a share, below the consensus estimate of $1.22 a share. While lower deal-making volume drove most of the decline in estimates, equity capital markets have been a modest plus for the banks, Fannon said. Goldman Sachs also faces about $1 billion in commercial real estate and goodwill impairments, while Morgan Stanley will book some severance costs. Goldman is also reportedly shopping around its credit card alliance with Apple Inc. AAPL as part of its effort to consider strategic alternatives for its consumer banking units, Fannon said. He also expects Goldman to report a roughly $500 million goodwill impairment related to its GreenSky consumer lending business amid reported sales efforts for the unit. Shares of Goldman Sachs are up fractionally in premarket trades, while Morgan Stanley is gaining 0.3%.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.